Is Your Business Prepared for a Rising Minimum Wage? Get out in front of the issue to prevent it from becoming a problem.
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As minimum wages rise across the country -- in some cases to $15 an hour -- many business owners we talk to are concerned. Should you be? Like so many things in life, it's best to take the long view, even though politicians on both sides prefer headlines now. It seems like common sense that a sudden, overnight increase to the minimum wage would be disruptive to business. However, a gradual minimum wage increase can be an opportunity for business leaders to get in front of the challenges and make adjustments and optimizations to their organizations that will actually make them stronger in the long run.
Related: How to Increase Your Employees' Satisfaction Without Giving Them a Raise
Beyond for or against.
Some business leaders don't worry about minimum wage hikes. In fact, they see it as an employee motivator. Rising wages could mean less turnover and more productivity, either because employees value their jobs more or because managers expect more from them. Another school of thought says that a minimum wage hike is good for the local economy because low-wage earners who get extra money tend to spend it and put that money right back into the economy, which can be a boon for local business.
Of course, others disagree, and are legitimately concerned that their business can't afford a mandated minimum wage hike. Economists who study the minimum wage and labor costs have yet to reach a consensus. The University of California, Berkeley looked at Seattle's increased minimum wage for fast-food and full-service restaurants from 2009 to 2016 and found no dips in employment or harmful effects. On the other hand, the University of Washington published a study that reported that raising the minimum wage caused employers to reduce hours, thereby reducing employees' earnings by $125 per month.
Here's another way to look at it. An increase to the minimum wage, in and of itself, is not the issue. Rather, it all depends on how your business reacts. Here are some tips to survive and thrive a rising minimum wage.
1. First, figure out how much it's going to cost you.
It's easy to see that $15 an hour number and get anxious. Don't. First, understand what it actually means for your business. Do the math. Calculate your revenues, profits and outgoing expenses. Once you understand your cash flow situation, you can start thinking about a hiring plan that won't break the bank. You may be in for some good news. Maybe your business can absorb the shock of higher wages no problem. And if it can't, then maybe it's time to look at the cost benefits of investing in a freelance or contractural workforce.
Related: How Prioritizing Employee Welfare Improves Your Business Bottom Line
2. Re-think the way you hire.
Take a good, hard look at your recruiting pipeline. How many star candidates are in there? As talent becomes more expensive, it may be time to revise the way you recruit and hire, because now more than ever, the cost of a bad hire is exorbitant. Does your organization have an "employment brand" that attracts the kind of people you most want to hire? Now's the time to ask the tough questions.
3. Look for ways to increase productivity.
If your employees are going to make more, expect more from them. Now's the perfect time to review how work gets done in your day-to-day business. What inefficiencies are holding you back? Don't be shy. All businesses have some degree of unnecessary friction that slows down progress. Assume that your workforce will be more incentivized to produce, and then do your part. Give them the tools they need to be as effective as possible.
4. Say goodbye to manual processes.
Because productivity is so important, it's worth taking a deeper dive into the way work gets done at your company. Too many mid-market companies are mired in manual processes that needlessly complicate their day-to-day operations. The hidden costs of paper-based and manual recordkeeping can really add up. Now's the time to look under the hood. What activities do your employees do, day after day, that could be automated? If those activities were automated, you might be pleasantly surprised at how much extra time they have to pursue more productive projects.
Related: Outsourcing is a Shortcut; Insourcing is an Investment
The bottom line.
Business owners face challenges every day, and the minimum wage hike is just one of many. If you think strategically about how to get in front of the problem, you can use this moment as opportunity to fine tune your business so that your company is stronger and better positioned than before.